Basic salary — the line everything else hangs off
Basic is usually 40-50% of CTC, and it is the most consequential number on the slip even though it is rarely the largest.
Your PF contribution is calculated on basic plus dearness allowance, not on gross salary. Your gratuity is calculated on basic. Your HRA exemption is capped as a percentage of basic. A low basic means a smaller forced-saving stream and a smaller HRA exemption; a high basic means more locked away and less in hand now.
Employers vary this deliberately. If you are comparing two offers with the same CTC, comparing the basic tells you more than comparing the headline.
HRA — only worth something if you pay rent
House Rent Allowance is exempt from tax under the old regime only — and only up to the LEAST of three amounts. One: the HRA you actually received. Two: 50% of basic in Delhi, Mumbai, Kolkata or Chennai, 40% anywhere else. Three: the rent you paid minus 10% of basic.
Two things surprise people. Bengaluru, Hyderabad and Pune are not metros for this purpose, whatever their size. And if your rent is below 10% of your basic, the exemption is nil regardless of how much HRA you are paid.
Under the new regime the whole HRA is taxable. That is one of the main reasons the old regime still wins for people paying serious rent in a metro.
Provident fund — the line people misread most
You contribute 12% of basic. Your employer contributes 12% too. Most people assume that means 24% of basic lands in their PF account.
It does not. Of the employer's 12%, 8.33% of wages — capped at the ₹15,000 statutory ceiling, so ₹1,250 a month — is diverted into the Employees' Pension Scheme. Only the remainder joins your EPF balance.
That is why the passbook never matches the payslip, and why people periodically conclude their employer is stealing from them. The EPS money is not gone; it buys a monthly pension after 58 rather than a lump sum.
| Line | On a ₹15,000 basic | Where it goes |
|---|---|---|
| Your contribution | ₹1,800 | Your EPF |
| Employer contribution | ₹1,800 | Split, below |
| — to pension scheme | ₹1,250 | EPS — monthly pension later |
| — to your EPF | ₹550 | Your EPF balance |
The deductions at the bottom
Professional tax is levied by your state, not the Centre, and is constitutionally capped at ₹2,500 a year. Some states charge none at all.
TDS is income tax deducted at source, based on the regime and the declarations you gave HR. It is an estimate, not the final bill — if you over-declare investments in April and never make them, you owe the difference when you file.
Anything else — a canteen deduction, a notice-pay recovery, an insurance premium — should have a name. If a line has no name, ask HR what it is. You are entitled to know.
The three things worth doing in your first month
Activate your UAN on the EPFO portal and check that contributions are actually being credited. Employers occasionally deduct and do not deposit, and the sooner you notice the easier it is to fix.
Give HR your investment declaration honestly. Over-declaring to reduce monthly TDS just moves a larger bill to March.
Work out your actual monthly in-hand before you commit to rent. The offer letter figure is not the number you can spend.